Page 1 Performance Audit Of The Special Event . - San Diego
Page 1Performance Audit of the Special Event Permit Application ProcessMay 5, 2017DATE:May 5, 2017TO:Audit Committee Members, Honorable Mayor and Members of the City CouncilFROM:Eduardo Luna, City AuditorSUBJECT:Performance Audit of the Special Event Permit Application ProcessTransmitted herewith is an audit report on the Special Event Permit Application Process. Thisreport was conducted in accordance with the City Auditor’s Fiscal Year 2017 Audit Work Plan,and the report is presented in accordance with City Charter Section 39.2. The Audit Results arepresented on page 5 of the report. Management provided a response to the report andagreed with the recommendation.We would like to thank the Special Events and Filming Department (SE&F) and the CityAttorney’s Office staff for their assistance and cooperation during this audit. All of theirvaluable time and efforts spent providing us information are greatly appreciated. The auditstaff responsible for this audit are Luis Briseño, Shawneé Pickney, and Kyle Elser.Results in BriefThe Special Events and Filming Department (SE&F) provides a number of services to supportspecial events in San Diego, including the management of the special event permittingprocess for special events that take place on City outdoor public property. 1 SE&F is alsoresponsible for ensuring the City’s compliance with a 2014 lawsuit settlement agreement,which requires the City to perform environmental review, pursuant to the CaliforniaEnvironmental Quality Act (CEQA), for all Special Event Permit Applications.We found that SE&F has been meeting key elements of its special event permitting process,which includes environmental review. Specifically, we found that, within our sample, SE&Fissued a Special Event Permit for all special events; SE&F correctly invoiced applicants for theSpecial Event Permit Application fee; the City collected the amounts invoiced; and that SE&Fconducted an environmental review for all Special Events Permit Applications as required bythe 2014 lawsuit settlement agreement. We also determined that the Special Event Permit—and its references to the Special Event Permit Application and the Special Event PlanningGuide—include clauses that place event planning and implementation responsibilities,Prior to Fiscal Year 2017, the Special Events and Filming Department was known as the Office of Special Events.We refer to the department as the Special Events and Filming Department (SE&F) throughout this report.1OCA-17-019OFFICE OF THE CITY AUDITOR1010 SECOND AVENUE, SUITE 555, WEST TOWER SAN DIEGO, CA 92101PHONE 619 533-3165 FAX 619 533-3036TO REPORT FRAUD, WASTE, OR ABUSE, CALL OUR FRAUD HOTLINE: (866) 809-3500
Page 2Performance Audit of the Special Event Permit Application ProcessMay 5, 2017including the proper completion of any necessary environmental mitigation requirements,with the permittee. In addition, we found that SE&F can improve the amount of time it takesto invoice an applicant after initiating the Special Event permitting process. We make onerecommendation to improve the special event permitting process by developing a standardbilling timeframe for Special Event Permit Application fees, and SE&F agrees with thisrecommendation. The Management Response Memorandum is included on page 18 of thisreport. A detailed audit objective, scope, and methodology is found on page 14 of this report.We conducted this performance audit in accordance with generally accepted governmentauditing standards. Those standards require that we plan and perform the audit to obtainsufficient, appropriate evidence to provide a reasonable basis for our findings andconclusions based on our audit objectives. We believe that the evidence obtained provides areasonable basis for our findings and conclusions based on our audit objectives.BackgroundIn accordance with the City Auditor’s Fiscal Year 2017 Audit Work Plan, we performed an auditof the efficiency and effectiveness of the Special Events and Filming Department’s (SE&F)special event permitting process. Specifically, our objectives were to: Assess whether SE&F invoiced applicants for the correct Special Event PermitApplication fee; Assess whether the City collected the amounts invoiced; Determine if SE&F issued a special events permit for FY 2016 special events; Determine if SE&F developed an environmental review process and whether SE&Fconducts an environmental review for all Special Event Permit Applications as requiredby the 2014 lawsuit settlement agreement; Assess the City’s liability for environmental reviews completed by outside consultants;and Determine if applicants experience any time and money impacts as a result of theenvironmental review process.SE&F provides a portfolio of services designed to support San Diego's neighborhoods and theCity's special event, filming, business, and tourism industries. The department manages thespecial event permitting process for special events that take place on City outdoor publicproperty.OCA-17-019
Page 3Performance Audit of the Special Event Permit Application ProcessMay 5, 2017SE&F’s services help to generate economic impact and media exposure for San Diego. Eventand film credits for the department include the support of: Comic-Con International; Community festivals for local artisans, performers, and merchants; Athletic events such as the 2016 Major League Baseball All-Star Game; Seasonal events such as Balboa Park December Nights holiday festival; and Television filming such as Fox Entertainment’s scripted series “Pitch.”SE&F assesses a processing fee of 150 for Special Event Permit Applications received sixty ormore days prior to the event. Applications received less than sixty days prior to the eventrequire an additional late fee of 10 per business day.Permit Issuance Timelines for Special Events Vary Based on Event NeedsAccording to the Special Event Guidelines regarding the California Environmental Quality Act(CEQA Guidelines), the special event permitting process, including environmental review,could take up to 285 days to complete. Moreover, per the CEQA Guidelines, timelines forreceiving a Special Event Permit Application vary based on factors associated with eachapplication, with more complicated or environmentally-sensitive elements requiring moretime and/or a higher level of environmental review.SE&F’s permitting process includes an initial review of the Special Event Permit Applicationfor completeness, invoicing for the Special Event Permit Application processing fee,coordinating with pertinent authorities, and final Special Event Permit issuance. SeeAttachment C for a description of this process.SE&F is Responsible for Performing Environmental Review for All Special Event PermitApplications Pursuant to the California Environmental Quality Act (CEQA)As part of managing the special event permitting process, SE&F performs environmentalreview pursuant to the California Environmental Quality Act (CEQA) for all Special EventPermit Applications. CEQA is a California state law that requires public agencies such as theCity to consider the impacts of their actions on the environment. According to Title 14 of theCalifornia Code of Regulations, §15002(a)(1)(2)(3)(4), the basic purposes of CEQA are to: Inform governmental decision makers and the public about the potential, significantenvironmental effects of proposed activities;OCA-17-019
Page 4Performance Audit of the Special Event Permit Application ProcessMay 5, 2017 Identify ways to avoid or significantly reduce environmental damage; Prevent significant, avoidable damage to the environment by requiring changes inprojects through the use of alternatives or mitigation measures when thegovernmental agency finds changes to be feasible; and Disclose to the public the reasons why a governmental agency approved a project inthe manner the agency chose if the project involves significant environmental effects. 2Due to special events having the potential to affect the environment and because SE&F,acting on behalf of the City, is authorized to condition, approve, or deny a Special EventPermit Application, CEQA requires the City to perform environmental review of a project priorto the issuance of a Special Event Permit.Effective July 1, 2014, pursuant to CEQA, and to meet the terms of a 2014 lawsuit settlementagreement, the City added environmental review as another component to the special eventpermitting process. 3 As of July 1, 2014, SE&F performs an environmental review of all SpecialEvent Permit Applications received by the City on or after July 1, 2014 or that have specialevents dates on or after January 1, 2015.SE&F’s environmental review process—which is part of the larger permitting process shownin Attachment C—includes a review by a Senior Planner, the issuance of an environmentaldetermination, and, when applicable, a public appeal period. See Attachment D for adescription of this process.According to the CEQA Deskbook, a project is a discretionary action with potential physical effects on theenvironment.3In 2014, the City of San Diego settled several lawsuits alleging that the City had not complied with CEQAregarding special event and discretionary park use permitting.2OCA-17-019
Page 5Performance Audit of the Special Event Permit Application ProcessMay 5, 2017Audit ResultsFinding #1: The Special Events and Filming Department is Achieving KeyElements of its Special Event Permitting ProcessSpecial Event Permit Application Invoicing, Fee Collection, and Permit IssuanceAs part of our review, we assessed whether the Special Events and Filming Department (SE&F)invoiced applicants the correct Special Event Permit Application fee and whether the Citycollected the amounts invoiced. Applicants for a Special Event Permit are required to pay anapplication fee of 150 for applications received sixty or more days prior to the event.Applications received less than sixty days prior to the event require an additional late fee of 10 per business day. In all cases, applications must be substantially complete in order toinitiate the permit review process. Special Event Permit Application fees for the 146 specialevents reviewed in our sample totaled 25,070. 4 We also verified that SE&F authorized specialevents by reviewing Special Event Permits for every event in our sample.Based on our sample of special events held in FY 2016, we found that: In accordance with the application fees described in the Special Event Planning Guide,SE&F invoiced the correct Special Event Permit application fees for the special eventsin our sample. We noted a few immaterial exceptions that totaled less than onepercent of the fees in the sample. In accordance with the City’s Administrative Regulation 63.30, the City collected theSpecial Event Permit Application fees invoiced for the special events in our sample. 5 In accordance with San Diego Municipal Code Section 22.4004(a), SE&F issued aSpecial Event Permit for every special event in our sample. 6 As a result, each specialevent in our sample had authorization to occur.We also found that SE&F can improve the amount of time it takes to invoice an applicant afterinitiating the special event permitting process. The City’s Administrative Regulation 63.30requires departments that issue invoices, billings, or otherwise create receivables to issueinvoices or billings when monies are owed. According to SE&F and the Special Event PlanningThis includes fees for 135 special events in FY 2016 with a Categorical Exemption and 11 special eventsdetermined to be consistent with an existing environmental document between FY 2015 and FY 2017.5One of the purposes of the City’s Administrative Regulation 63.30, “Accounts Receivables – Invoice Processingand Collection,” is to assure maximum collections of all monies due to the City in a timely manner.6San Diego Municipal Code Section 22.4004(a) requires any person conducting, promoting, managing, aiding, orsoliciting attendance at a Special Event to obtain a Special Event Permit from the City.4OCA-17-019
Page 6Performance Audit of the Special Event Permit Application ProcessMay 5, 2017Guide, SE&F’s services begin when SE&F deems a Special Event Permit Application to besubstantially complete. As such, once SE&F services commence, it should invoice applicants.As shown in Exhibit 1, we found that invoice processing times varied considerably—from oneday to over a year—for Special Event Permit Application processing fees in FY 2016. Onaverage, SE&F invoiced applicants approximately 63 days after initiating the review process.Exhibit 1Invoice Processing Times for FY 2016 Special Event Applications Varied from One Day to Over aYear700600Invoice Processing Times(in Days)50040030020010000-10020406080100120Event Number-200Source: OCA generated based on a review of Special Events Permit Applications and invoices generated fromSAP.Note: According to the Special Events and Filming (SE&F) Department, the outlier of -153 days resulted from achange in the special event date after SE&F deemed the Special Event Permit Application to be substantiallycomplete and after initiating the special event permitting process.According to SE&F, it had not been able to invoice applicants in a timely and consistentmanner in the past due to limited staff resources, competing priorities, and the fast-pacednature of their work. Additionally, in cases where an applicant had not previously beenestablished as a business partner in the SAP invoicing system, SE&F could not generate aninvoice until this step was completed by another department. Moreover, SE&F did not havewritten internal policies or procedures that provide guidance for billing timelines. Finally,SE&F noted that in the department’s efforts to ensure applicants paid Special Event PermitOCA-17-019140
Page 7Performance Audit of the Special Event Permit Application ProcessMay 5, 2017invoices due to the City, from time to time the department determined an invoice may havebeen sent to an incorrect or no longer valid address for an applicant. In such cases, thedepartment worked with the City Treasurer to cancel the original invoice and re-issue a newinvoice, therefore affecting the invoice issuance date.According to SE&F, to address the timeliness of invoicing and to establish improved checksand balances in the process, an Associate Management Analyst joined the department inNovember 2016. The analyst is responsible for administrative tasks that support thedepartment, including invoicing applicants for the Special Event Permit Applicationprocessing fee. SE&F noted that it will comply with the City’s current and futureadministrative regulations regarding accounts receivables with a goal of invoicing within 10business days on average.If uncorrected, inconsistent or untimely billing may increase the risk that SE&F lapses in billingfor its services, which may result in the City not collecting all Special Event Permit revenues.Developing policies and procedures for invoicing that include a standard billing timeframe canhelp SE&F improve its permitting process and ensure it bills applicants in a timely andconsistent manner.Recommendation#1: To ensure all applicants for a Special Event Permit are consistently billed for the SpecialEvent Permit Application fee in a timely manner, the Special Events and Filming Departmentshould develop and implement an invoicing policy and operating procedure that includes astandard billing timeframe. (Priority 3) 7The Special Events and Filming Department Developed an Environmental ReviewProcess and Conducts an Environmental Review for All Special Event PermitApplicationsAs part of our review, we assessed whether the Special Events and Filming Department (SE&F)developed an environmental review process and conducts a review for all special events asrequired by a 2014 lawsuit settlement agreement.We found that SE&F, in consultation with the City Attorney’s Office, developed anenvironmental review process to evaluate all Special Event Permit Applications. To overseethe implementation, consistency, and efficiency of this process, in FY 2015, SE&F hired aSenior Planner to serve as the primary point of contact with special event organizers.According to SE&F, when completing an environmental review, the Senior Planner can alsoPriority Class 3 means operation or administrative process will be improved. See Attachment A for a Definitionof Audit Recommendation Priorities.7OCA-17-019
Page 8Performance Audit of the Special Event Permit Application ProcessMay 5, 2017consult with the Planning Department as necessary. As part of review protocols, the SeniorPlanner: 1) uses a screening document, based on California Environmental Quality Act (CEQA)regulations; 2) notices the public (when applicable) about events exempt from furtherenvironmental review; 3) is included in Production Meetings with applicants; and 4) is a partythat must sign off in the Special Event Permitting System (SEPS) prior to the issuance of aSpecial Event Permit. 8 Within this system, we found that SE&F conducted an environmentalreview for all special events in our sample.The Special Event Permit Application, the Special Event Planning Guide, and the SpecialEvent Permit Include Indemnification Language That Reduce the City’s Liability forEnvironmental Reviews Completed by Outside ConsultantsBased on a review of the Special Event Permit Application, the Special Event Planning Guide,and the Special Event Permit, the use of an outside consultant, if necessary, for conductingenvironmental review is the responsibility of the permittee. In totality, the Special EventPermit—and its references to the Special Event Permit Application and the Special EventPlanning Guide—include clauses stating the permittee releases the City “from and against alllost [sic], damages, liability, claims, suits, costs and expenses arising from or in any mannerconnected to the requested activity.” By signing the Special Event Permit, the permittee alsoagrees to be knowledgeable about, fully understand, and to meet or exceed all local, state,and federal codes, laws, policies, and regulations” associated with the special event.Time and Cost Impacts to the Applicant Depend on Environmental Review ResultsAs part of our review, we examined a sample of special events that took place in FY 2016 todetermine if applicants experience time and cost impacts as a result of the environmentalreview that SE&F completes for all applications. We found that time and cost impacts to theapplicant vary and depend on the results of SE&F’s environmental review. Attachment Doutlines the three types of outcomes: categorically exempt, consistent with an existingenvironmental document, or requiring further environmental analysis.Based on our sample, the total application processing time for special events that qualified fora categorical exemption averaged 106 days. 9 However, environmental review has thepotential to add more time to the permitting process if the special event requires thepreparation of a new environmental document.Production Meetings serve as a mechanism for SE&F to communicate application and permit issuance statusupdates to event organizers. Discussions include pre-event coordination, post-event evaluation, and discussionof special needs or issues unique to an event or community.9The total application processing time refers to the period of time between when a Special Event PermitApplication is considered substantially complete and when a Special Event Permit is signed by the SE&F Director.8OCA-17-019
Page 9Performance Audit of the Special Event Permit Application ProcessMay 5, 2017We also examined all special events that were determined to be consistent with an existingenvironmental document. These totaled only 10 special events since July 1, 2014. Based onour review of events within in our sample, the total application processing time for specialevents reviewed for consistency with an existing environmental doc
and its references to the Special Event Permit Application and the Special Event Planning Guide—include clauses that place event planning and implementation responsibilities, 1 Prior to Fiscal Year 2017, the Special Events and Filming Department was known as the Office of Special Events.
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